Pattern Recognition Indicator for MT4

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Introduction to the Pattern Recognition Indicator

Candlestick patterns are some of the most basic reversal signals which many traders use. It also has the advantage of having the least lag when compared with technical indicators. This is why many traders use candlestick patterns as an entry trigger.

What is the Pattern Recognition Indicator?

The Pattern Recognition indicator is a technical indicator which automatically identifies various candlestick patterns. It plots a red marker above price action and labels it in red whenever it detects a bearish candlestick pattern, and a blue marker below price action and labels it in blue whenever it detects a bullish candlestick pattern.

Pattern Recognition Indicator for MT4

How the Pattern Recognition Indicator Works?

Different candlestick patterns have different descriptions and characteristics which can be identified by an algorithm in the program.

For example, a bullish engulfing pattern is composed of two candles wherein the second candle has completely reversed against a prior bearish candle. This can be programmed into an algorithm which identifies bullish candles with a closing price higher than the open price of a prior bearish candle.

The same concept of converting the characteristic description of a candlestick pattern into an algorithm is used for all the patterns. The indicator simply marks and labels the patterns whenever the algorithm detects a pattern.

How to use the Pattern Recognition Indicator for MT4

The Pattern Recognition indicator has an alert function which can be toggled on and off on the “Show Alert” option within the indicator’s settings.

The other options simply allow traders to toggle the algorithm for identifying a certain candlestick pattern on or off.

How the Pattern Recognition Indicator Works

If you would have noticed, allowing the indicator to identify all candlestick patterns would seem confusing due to the sheer number of patterns available. It is better to turn off some of the patterns and select only those that you prefer using.

Buy Trade Setup

When to Enter?

Choose a candlestick pattern that you prefer using and toggle it on within the settings. Identify a currency pair which is in an uptrend based on price action. Visually confirm the pattern as soon as the Pattern Recognition indicator identifies the chosen pattern. Open a buy order if the pattern does indicate a bullish reversal. Set the stop loss below the pattern.

When to Exit?

Close the trade as soon as price action shows signs of a possible reversal.

How to use the Pattern Recognition Indicator for MT4 - Buy Trade

Sell Trade Setup

When to Enter?

Choose a candlestick pattern that you prefer using and toggle it on within the settings. Identify a currency pair which is in a downtrend based on price action. Visually confirm the pattern as soon as the Pattern Recognition indicator identifies the chosen pattern. Open a sell order if the pattern does indicate a bearish reversal. Set the stop loss above the pattern.

When to Exit?

Close the trade as soon as price action shows signs of a possible reversal.

How to use the Pattern Recognition Indicator for MT4 - Sell Trade

Conclusion

Although this indicator does seem confusing at first glance, if some of the patterns are disabled, it would allow for a much more streamlined number of reversal indications.

It can be used as an entry trigger when traded in confluence with a bigger picture trade setup or when traded in confluence with the trend.

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Pattern Recognition Indicator for MT4

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